Posts Tagged ‘Middle class’

The cartoonist and writer Ted Rall, author of a new biography of Bernie Sanders, wrote a good article about how the political differences between Sanders and Hillary Clinton can be explained by the fact that Sanders grew up poor whereas Clinton didn’t.

One of the differences between people who grow up poor vs. people who grow up middle class is that the latter on average are better able to delay gratification in anticipation of future gains.

Middle class moralists like to say this is because poor people lack strength of character. I say the difference is that is hard to take the long-range view when you’re not sure week-to-week whether you will have food on the table or be able to pay the rent.

Psychological tests show that middle-class children on average are more likely than poor children to refrain from eating a marshmallow if they are promised a second marshmallow in return.

Middle class moralists say this is because middle class families have better moral values. I say the difference is that it is easier to delay gratification if your life experience is that people keep promises and that nobody will snatch away what you have.

Bernie Sanders grew up in a home in which his parents lived paycheck to paycheck and never could be certain of the future even on a month-by-month basis.

Hillary Clinton never experienced anything like this. She and her husband said they exited the White House $10 million in debt, but there never was any danger they would have to live on Ramen noodles or live in a homeless shelter.

So Sanders is passionate about immediate and drastic reforms of the economic system, and Clinton tells working people and the unemployed to be realistic and settle for tiny incremental under the existing system.

If you ambition is to be a millionaire or multi-millionaire, your chances are probably greater here in the United States than they are any place else. The USA has more of them than any other country, and the number is growing.

The problem is that average and middle-class Americans aren’t doing so well. According to the current neo-liberal philosophy, that is perfectly okay. Winners should be rewarded, losers should suffer and rich people are (by definition) winners.

I hold to the older philosophy, which is that rewards should go to entrepreneurs and other successful people only because and only when they create things of value to the rest of us.

The justification for capitalism is that it is not a zero-sum game – that increasing the wealth of the rich does not necessarily make the rest of us poorer. During the 1950s and 1960s, I thought this plausible – at least for Americans. I don’t think this justification holds true for the USA today.

Black homeowners and business owners lost the most in Hurricane Katrina. Black professionals such as physicians and lawyers have moved on. And black school teachers are losing their jobs to supposed school “reform.”

The United States was the first country in which a majority of the people were taught to think of themselves as middle class. In Victorian English novels, the middle class are the doctors, lawyers and other professionals who aren’t working class, but not truly upper class.

Of all the preposterous assumptions of humanity over humanity, nothing exceeds most of the criticisms made on the habits of the poor by the well-housed, well-warmed and well-fed. ==Herman Melville (1819-1892)

Liberals are supposed to be the ones who make excuses for the short-comings of minorities and poor people, but this isn’t true of my friends.

Instead, whenever the conversation gets around to social problems, the consensus is that poverty is bad and racial discrimination is bad, but “lack of personal responsibility” is a big thing, too. Bill Cosby’s name comes up a lot.

I’m uncomfortable with these conversations because, on the one hand, there’s a certain amount of truth in what’s being said, and, on the other hand, I don’t think I have standing to make harsh moral judgments about people who face difficulties so much worse than anything I ever did.

There are people who are completely messed up—unable to hold a steady job, uninterested in marriage and family responsibilities—who wouldn’t be able to make it in the best of societies.

On the other hand, the few poor people I know aren’t like that. They are people who are struggling bravely against great odds.

There’s one young black man I know. He was convicted as a teenager for robbing a drug dealer. For that one mistake, he basically has no future, even though he is hard-working, intelligent and well-mannered.

On the other hand, I have a distant relative by marriage, a middle-aged white man who was in trouble all through his teenage years, smoking dope and getting into trouble, and constantly being bailed out by his father. He turned himself around, and is now a responsible adult with a good job.

It is fine with me that he got all these second chances. But if his father had been poor, or black, or both, he wouldn’t have gotten them.

And then there are the young black men who, after each big snowstorm, come walking down the middle of my street with snow shovels across their shoulders, asking if I need my driveway shoveled out. I usually hire them even when I don’t strictly need it.

They’re all polite and hard-working. Maybe these qualities will be enough to raise themselves into the middle class. But if the number of people with middle class incomes continues to shrink, the only way they’ll be able to do it is by bumping somebody else out of the middle class.

Americans historically have thought of ourselves as a middle class nation, a nation in which the majority of people were neither poor nor rich. That is becoming less true.

The median level of income—that is, the dividing line between the top and bottom 50 percent of income earners—has been falling for 15 years. This is not a good thing.

At the same time the middle tier of income earners is shrinking. The middle tier are those who earn more than two-thirds of the median income and less than double the median income. This is not a good thing.

I think the causes of this trend are the de-industrialization of the U.S. economy, the financialization of the U.S. economy and the upward redistribution of income to a small elite of financiers and corporate executives.

During the Gilded Age of the late 19th century, U.S. politics was at least as corrupt as it is now, and a tiny oligarchy of wealth had as much power as it does now. Yet these oligarchs also built railroads, steel mills, grain elevators—what we call physical capital—that was of ultimate benefit to the nation as a whole. The same is true of the oligarchs of China and Russia today.

In contrast, the super-rich class in the USA today can’t seem to find anything useful to do with their money. And that’s not because there is nothing useful to be done. American roads, bridges and water and sewerage systems, as one example, need upgrade and repair. But, no, I don’t think selling off American public infrastructure to private interests would be the answer.

Going Postal by Peter Byrne from his new book of the same name. (via Corrente)

A corporation headed by Senator Dianne Feinstein’s husband, Richard C. Blum, has an exclusive contract to sell U.S. post offices as the Postal Service downsizes. He is selling them to his friends, cheap.

Market Basket, a supermarket chain based in New Hampshire, is an example of how a CEO can run a profitable business that pays good wages and serves customers well, and still be kicked out for failing to “maximize shareholder value”.

The Obama administration is pushing Congress to enact the Trans-Pacific Partnership and the Trans-Atlantic Free Trade Agreement, but the public is beginning to catch on that these are schemes to establish corporate power in international law.

My friend Anne e-mailed me an article entitled Everything Is Amazing and Nobody Is Happy by Morgan Housel for The Motley Fool. He says the American standard of living is just great, and American pessimism about the economy is not based on any fact.

Click on the link and see if you agree. I don’t see it. Housel’s basic argument is that we Americans live longer and enjoy longer retirements than in the past. That is, in fact, true for me. But unless something changes, I don’t think it is going to be true for my niece and nephew, who are in their 20s, and their young children.

What I see, as I look around, is (1) the evaporation of good jobs in manufacturing, (2) expansion of low-wage jobs in fast-food restaurants and chain stores, (3) evaporation of pensions and other benefits, (4) workers laid off in middle age who are surviving on a combination of part-time and temporary jobs, (5) young workers doing the same. There are Americans in high tech and high finance who are doing well, but they are a minority.

A book (which I haven’t read) entitled Average Is Over by an economist named Tyler Cowen says the future economy offers little to most Americans. He argues that high technology and automation will provide great opportunities for the most intelligent and enterprising 15 percent of the population, but the rest of us will have few opportunities except in service jobs providing for the affluent. I don’t think his prediction is inevitable, but I certainly think it is possible.

Of course average Americans are much better off than their ancestors a century ago, and infinitely better off than child laborers in the sweatshops of Bangladesh or forced laborers in the cotton fields of Uzbekistan. But our country is moving backward, not forward. There’s no law of nature that says that, just because we’re Americans, we are guaranteed the “American standard of living”.

When I attended college sixty-some years ago, state universities provided free or affordable education to anyone who could do college work. That is the function of a public university. If the goal of a university is to maximize revenue by maximizing enrollment and/or tuition, it is no different from a private, for-profit educational institution and no reason why it should be subsidized by the taxpayers.

It is hard to escape the following conclusion:

If tuition has increased astronomically and the portion of money spent on instruction and student services has fallen, if the (at very least comparative) market value of a degree has dipped and most students can no longer afford to enjoy college as a period of intellectual adventure, then at least one more thing is clear: higher education, for-profit or not, has increasingly become a scam.

“It’s expensive to be poor” was an old saying of the Catholic Worker movement. It is a true saying. Poor people, because of lack of access to transportation, information and credit, often wind up paying more than than middle-class or well-to-do people would pay for the same things. But now it’s getting to be true that “It’s expensive to be middle class.” The chart above shows the increase, over and above the rate of inflation, in the cost of goods, such as home ownership and college education, that define Americans as middle class.

Double click to enlarge.

In order to maintain a middle class material standard of living, American families took on more and more debt during the past 20 years. I believe the process of substituting debt for income has reached its limit. I believe that is why the Great Recession is so much worse than an ordinary recession, and why the effect of economic stimulus was so much less than hoped.

I think it is a good thing, not a bad thing, that middle-class Americans are paying down their debts and trying to live within their means, but there is going to be a painful readjustment as manufacturers not only in the United States, but Japan, China and other countries adapt to the changed American mass market.

There is a dilemma here. Private industry is not going to expand unless there is a market for its products. Americans are not going to increase their buying unless they have jobs at good wages. One thing that can help break the deadlock is for the U.S. national, state and local governments to continue to employ people to provide needed services such as public education, road maintenance and firefighting, and for the government to invest in long-range infrastructure and other needed projects.

Click on Growth and the Middle Classfor the economic case for a strong and prosperous middle class by David Madland, head of the American worker project for the Center for American Progress, a liberal research center.

A blogger named John Pennington in San Francisco wrote a good post showing what it takes for average American families just to get by.

Let’s talk about costs for a family of four, two adults, two children, because that’s the most common family makeup in the US.

The first rule of thrifty living is to sweat the big stuff. Forget bargain tooth paste. If you are spending too much on the big ticket items—rent, car, food, etc.—no amount of counting pennies will help. This is great advice, but worthless if market conditions where you live don’t allow you to save on big ticket items.

Take rent. Average rent for a two-bedroom apartment in the US is $1,029 this year (2011). That means your annual income must be about $41,000 at bare-bones minimum if you are not to spend more than 30% of it on rent. (The numbers are $2000+ and $80,000 here in San Francisco.)

Question: If you have been unemployed for some time, how are you going to find a job that pays above $40,000? In 2011, if you can find any work at all, it is likely to pay you $20,000 to $30,000. That means that there will be no place in San Francisco and most other cities you can afford to rent. This is why people commute rather long distances to work in cities; the rent is more affordable. It’s also why there are usually two earners in such families, and why such families rarely save enough for retirement.

Here’s a pretty good target household budget from a noteworthy site:

Housing – 24 to 30 percent

Utilities – 10 percent (lights, gas, water, trash pick-up and sewer)

Groceries – 12 to 20 percent

Car Expenses – 15 percent (includes car payment, fuel and repairs)

Medical – 5 to 6 percent

Clothing – 4 to 8 percent

Debt – 10 to 12 percent (personal loans, old debt, credit cards)

Entertainment – 5 percent

Savings – up to 10 percent (as much as possible, but a little is better than none)

Charity – 2 -10 percent (this is a personal decision)

And here’s the dollar figures for that budget, with a $41,000 income:

Housing $820 to $1,025 per month

Utilities $342

Groceries $410 to $683

Car $512

Medical $171 to $205

Clothing $137 to $273

Debt $342 to $410

Entertainment $170

Savings up to $342 (10 percent)

Charity ?

Wow! So the first thing we realize is that we can barely afford an average two-bedroom apartment. That’s on $41,000. On $20,000 to $30,000, we can’t afford a broom closet.

Our income is $25,000. What the hell are we going to do? Well, here are some possibilities: Share rent with others on a large apartment, or rent a 1BR; sell your car and use public transit; use neighborhood medical clinics; get clothing from Goodwill; you must get rid of credit card debt (which is a whole ’nother topic); minimize entertainment by going to free things; forget savings. Charity?—you are charity.

If two of you work, and do all of these things, you will get by somehow. But what about education for your kids? What if one of you becomes seriously ill, or injured? What about income when you are old?

What if you can find no work? There are five unemployed for each new job, so there’s only a 20 percent chance you will find work at all. In October 2011 there are 14 million unemployed persons, many more counting under-employed and the discouraged unemployed. There are 49 million people living in poverty and 20 million people living on half the poverty level income.

It is a proud boast of the United States that we were the first country, and for a time the only country, in which members of the working class could enjoy a middle class income and standard of living. Unfortunately this is becoming a thing of the past.

What’s happening is well-described in an article by Andy Kroll on the Tom Dispatch web site. Here are some highlights.

Sometime in early June — he’s not exactly sure which day — Rick Rembold joined history. That he doesn’t remember comes as little surprise: Who wants their name etched into the record books for not having a job?

For Rembold, that day in June marked six months since he’d last pulled a steady paycheck, at which point his name joined the rapidly growing list of American workers deemed “long-term unemployed” by the Department of Labor. In the worst jobs crisis in generations, the ranks of Rembolds, stranded on the sidelines, have exploded by over 400% — from 1.3 million in December 2007, when the recession began, to 6.8 million this June. The extraordinary growth of this jobless underclass is a harbinger of prolonged pain for the American economy.

This summer, I set out to explore just why long-term unemployment had risen to historic levels — and stumbled across Rembold. A 56-year-old resident of Mishawaka, Indiana, he caught the unnerving mix of frustration, anger, and helplessness voiced by so many other unemployed workers I’d spoken to. “I lie awake at night with acid indigestion worrying about how I’m going to survive,” he said in a brief bio kept by the National Employment Law Project, which is how I found him. I called him up, and we talked about his languishing career, as well as his childhood and family. But a few phone calls, I realized, weren’t enough. In early August I hopped a plane to northern Indiana.